Works Ministry Ordered to Refund Shs2.5 Billion

Parliament Public Accounts Committee has ordered officials in the Ministry of Works to refund more than Shs2.5 billion in roads cash that was irregularly paid to one of the contractors.

This came after the Commissioner Internal Audit in the Ministry of Finance, Dr Fixon Okonye, told PAC on Wednesday that over Shs2.5 billion was paid to M/s General Nile Company for roads and bridges and Dott Services Ltd in a joint venture deal in respect of upgrading Kafu-Masindi Road. Of the Shs5.8 billion paid to the contractor, an additional Shs2.5 billion was illegally included in the contract document and paid out under the guise of Value Added Tax refund.

"The input VAT refund paid was in error therefore refundable from the contractor," Dr Okonye said. "The Works Ministry has no capacity to verify and confirm that the input VAT paid by the supplier was genuine and that it actually reached the Consolidated Fund Account."

PAC members were meeting Works officials led by the Permanent Secretary, Mr Charles Muganzi, to discuss audit queries for the years 2007/08 and 2008/10. PAC also invited Dr Okonye to testify on Shs2.5 billion that was illegally given to a contractor. In his response, Mr Muganzi said: "After the internal audit raised the query, I saw some merit and sought guidance from the Solicitor General. When I put much pressure demanding for the money, the contractor went to court."

"We didn't know the difference between input VAT and the output VAT, that jargon we didn't know. This is why I am now demanding the money from the contractor. The judgment of the case was supposed to be on August 3 but they told me that the matter has to be discussed internally."

According to the Internal Audit report, the VAT Act Cap 349 amendment of July 1, 2004 exempted the supply of feasibility studies, engineering designs and consultancy services and related civil works to the bridges and road construction. The implication of this is that the supplier of road work can neither take credit of input VAT from their supplier nor charge output VAT to their customers.

Of the Shs2.5 billion in question, PAC chairman Nandala Mafabi told Sunday Monitor that by the time of the report in June 2009, Works officials had paid out more than Shs1.5 billion through certificate Nos. 9A, 10A and11A which is also refundable to the Consolidated Fund. "We got information that officials in the Ministry of Works paid out close to Shs3 billion illegally and this money must be recovered," Mr Mafabi said.

More cash stolen

The Committee also heard that close to Shs400 million was allegedly stolen from the Ministry by some officials and passed to the contractor through advance payment guarantee.

According to Dr Okonye's report, the contract document required the contractor to avail a bank guarantee and not insurance bond as advance payment security. However, the contractor took Shs399.7 million illegally.

"Examination of the contract documents and certificates No 11 revealed that there was no advance payment security in place raising concerns. There is a possibility that the guarantee was stolen and handed over to the contractor. The absence of a valid advance payment guarantee tantamount to giving an unsecured free loan to the contractor," the report reads in part.

Last week PAC heard that another Shs521 million for roads was also stolen by accountants from the Accounts General's Office.